DraftKings and FanDuel withdraw from the AGA.

Following a discussion about how prediction markets fit into the legal landscape of sports betting at the American Gaming Association's (AGA) Public Policy Committee (PPC) meeting in Washington, D.C., on Monday, DraftKings and FanDuel abruptly disassociated themselves from the trade organization. Both companies had previously announced their intention to begin offering contracts for sporting events through prediction markets, which are regulated by the Federal Commodity Futures Trading Commission (CFTC), not by state regulatory bodies, reveals the Ingame portal.

Some time after the PPC general meeting on Monday (17), the AGA executive committee met, and the end result was a clear split between the AGA, DraftKings and FanDuel over prediction markets. The AGA actively opposes federal regulation of sports event contracts. Sources say the disagreement seemed to be enough to break the relationship, and DraftKings and FanDuel resigned before a vote on their future could be held.

“FanDuel built its business on maintaining strong partnerships in the industry,” a FanDuel spokesperson told InGame via email Monday night. “We value the spirit of collaboration that arises from these relationships. But as we expand into prediction markets, we recognize that this direction is not aligned with the current priorities of the American Gaming Association for its members. After careful consideration, we have decided to withdraw from our AGA membership at this time.”

A DraftKings spokesperson told InGame on Monday night: “As the company’s business strategy evolves — including with prediction markets — DraftKings has determined that its plans are no longer fully aligned with the AGA’s direction in certain areas and has decided to withdraw its membership.”

An AGA spokesperson confirmed the departures.

“Following negotiations with DraftKings and FanDuel, the AGA has accepted their request to cancel their memberships, effective immediately,” an AGA spokesperson wrote in a text message. “We wish them all the best and look forward to maintaining close ties in our mission to promote and protect legal and regulated gambling.”

Despite differing opinions regarding prediction markets, DraftKings and FanDuel are likely to continue lobbying, through the Sports Betting Alliance (SBA) and the AGA, to legalize traditional sports betting. These companies, along with bet365, BetMGM, and Fanatics Sportsbook, comprise the SBA.

Casinos are different from technology companies.

The exits highlight the differences between the types of companies that offer legal sports betting — traditional casino companies, such as Caesars, MGM, and Penn Entertainment, have chosen not to enter the prediction markets, while technology companies like DraftKings, FanDuel, PrizePicks, and Underdog are embracing this practice.

Although both casino companies and technology companies offer state-regulated sports betting, their business models and plans differ. Casino companies typically have hundreds of millions of dollars in physical assets to protect, mortgages to pay, and thousands of employees. Technology companies own few or no physical gaming locations and employ fewer people because almost all of their business is online rather than in-person.

Underdog is already operating with limited prediction markets in 22 states, including some that have state-regulated sports betting. Underdog is a technology provider for Crypto.com. PrizePicks launched its prediction platform on Friday in partnership with Kalshi.

Last week, ahead of the release of its third-quarter results by its parent company Flutter, FanDuel announced plans to launch FanDuel Predicts in partnership with CME next month. DraftKings made a similar announcement before the release of its third-quarter results the previous week. DraftKings acquired the CFTC-approved Railbird platform and plans to launch DraftKings Predictions “in the coming months.” Both DraftKings and FanDuel stated that they will not launch their prediction platforms in legalized sports betting markets and will exclude areas within Native American territories.

The AGA can now have a clearer message.

Contracts for sporting events gained notoriety in January when Kalshi began offering them before the Super Bowl. Since then, Crypto.com has also started offering them, and Polymarket plans to launch its services soon. In the regulated market, some argue that prediction markets—defined as financial tools and not gambling—are encroaching on the territory of state-regulated gambling. Some state regulators have sent cease-and-desist letters to prevent prediction markets from entering their jurisdictions, and Kalshi faces lawsuits in several US states.

Among these states is Nevada, where the gaming control board announced last week that FanDuel had relinquished its license and DraftKings had withdrawn its licensing applications. FanDuel operates a physical sports betting shop in Las Vegas, and neither DraftKings nor FanDuel hold an online betting license in Nevada.

The AGA has been lobbying against prediction markets, arguing that they are not subject to the same types of regulation as state-regulated sports betting sites, including a lack of responsible gambling guidelines. Prediction markets also do not pay state taxes.

The AGA has been walking a tightrope in its lobbying efforts over forecast markets, with some members opposing and others supporting it.

“This allows them to express themselves with complete freedom,” a source said when asked how the departures would affect AGA’s lobbying efforts. “The situation was reaching a point where it was going to get complicated.”